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spk02: Good afternoon and welcome to the Magnite third quarter 2021 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nick Corneluk, Investor Relations. Please go ahead.
spk07: Thank you, Operator, and good afternoon, everyone. Welcome to Magnite's third quarter 2021 earnings conference call. As a reminder, the comparisons you will see in the 10Q, as reported, include the financial results of SpotX and SpringServe for Q3 2021, but for the third quarter of 2020, the results do not include SpotX or SpringServe, given the acquisition dates of April 30 and July 1, 2021, respectively. During the course of this call, when we refer to results and associated year-over-year comparisons with the phrase as reported, we are referring to the basis as reported in our 10Q. When we make comments referring to pro forma comparisons, we are including SpotX and SpringServe for the third quarter of 2020 in order to provide a like-to-like comparison. Please keep in mind as it relates to SpotX and SpringServe acquisitions, prior quarterly results are estimated and unaudited. As a reminder, this conference call is being recorded. Joining me on the call today are Michael Barrett, CEO, and David Day, our CFO. I would like to point out that we have posted financial highlight slides to our investor relations website to accompany today's presentation. Before we get started, I will remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements, including but not limited to statements concerning our anticipated financial performance and strategic objectives, including the potential impact of COVID-19 on our business, as well as statements concerning the acquisitions of SpotX and SpringServe and potential benefits and synergies we expect to realize therefrom. These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from expectations or results projected or implied by forward-looking statements. A discussion of these and other risks, uncertainties, and assumptions is set forth in the company's periodic reports filed with the SEC, including our 2020 annual report on Form 10-K and our 10 Qs for Q1, 2, and 3 for 2021. We undertake no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including revenue ex-tax or less traffic acquisition costs, adjusted EBITDA, and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release in the financial highlights deck that is posted on our investor relations website. At times, in response to your questions, we may offer incremental metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be one time in nature, and we may or may not provide an update in the future on these metrics. I encourage you to visit our investor relations website to access our press release, financial highlights deck, periodic SEC reports, and webcast replay of today's call to learn more about Magnite. I'll now turn the call over to Michael. Michael, please go ahead.
spk00: Thank you, Nick. It's been a busy three months for us since our last call, especially since we just hosted all of you on September 15th for Investor Day, which, if you missed, I would highly encourage you to review. formats and channels, which combined were up 89% as reported or 26% on a pro forma basis. Our results are strong, but we're tempered with some late Q3 supply chain related ad cancellations, which we have also experienced early in the fourth quarter. Despite this temporary headwind, as well as a tough political advertising comp from last year, we still exhibited very strong financial results again this quarter. I'll first cover some quick performance highlights. CTV revenue, XTAC, grew 51% on a pro forma basis. Our DV Plus business grew mid-teens revenue, XTAC, year over year on a pro forma basis. DV Plus is comprised of our mobile and desktop businesses, which grew 18% and 11% respectively. Adjusted EBITDA margins on a revenue XTAC basis came in above expectations at 35%, and we generated $34 million in operating free cash flow, which we define as adjusted EBITDA less capex. This quarter, CTV represented 38% of revenue XTAC and now represents the largest portion of our business. After closing the spring serve acquisition this quarter, we are in an even stronger position to capture and gain share in CTV with the addition of a strategic ad server. The work we have done has created an industry-leading CTV market position with the ability to serve a broad set of customer types with many different products and services to fuel future growth as the only independent end-to-end monetization platform. It bears repeating that we now have significantly widened and strengthened the customer segments we serve across device OEMs such as Roku and Samsung, virtual MVPDs such as Sling and Hulu, digital-first platforms such as Pluto and Tubi, and, of course, major broadcasters and programmers such as Discovery and Fox and creating deeper, more strategic, more durable partnerships. In addition, we have also meaningfully expanded our service offering to touch more inventory and transaction types. And our CTV revenue includes not only fees from managed auctions, but also fees from publisher direct sold deals, managed service revenue, ad serving fees, and value-added service fees. and we now participate in every part of the CTV buying process, direct, upfront, and programmatic, through our technology solutions and our managed service offering. It is clear that IDFA removal has affected some industry players. I want to be clear, we are not one of them, despite seeing well over 80% adoption of iOS 14.5 on our platforms. Our business doesn't participate in app downloads, and we have very little social advertising, thus limiting our exposure. Further underpinning this point, we have seen a shift from iOS to Android and spend, and better than expected CPMs from iOS opt-outs, approximately 20% lower than opt-ins. Keep in mind that iOS revenue as a percentage of our total revenue ex-tax is in the mid-single digits, and there is zero CTV revenue in iOS. As a reminder, on the third-party cookie front, Google continues to plan to eliminate third-party cookies in Chrome toward the end of 2023. We continue to believe that first-party publisher segments collected in a privacy-compliant manner will be the future of identity solutions and that SFPs will be a driving force behind this transition. This is an area where we are positioned extremely well. Now, I'd like to go into greater detail regarding the components of our ad spend to provide additional color. I'll start with the strongest performing sectors in Q3. Tech, health and fitness, home and garden, retail, and financial verticals continue to be the strongest performing year-over-year sectors. And this is on top of a very strong Q3 2020. Year-over-year growth rates in this group range from 16 to 45%, and compared to pre-COVID levels, the two-year stacked growth rates are all above 45%, up to a high of 88%. These sectors also jointly comprise a significant portion of industry ad spend. One additional vertical that showed strength in Key 3 is arts and entertainment, with the return of movies, live sports, and TV productions, which was up over 70% year over year. While we are focused on moving large linear TV budgets over to CTV from leading national advertisers, we're also seeing traction moving smaller advertisers over to CTV, in particular with respect to mid-market and regional campaigns. REI started with us in Q2, tripled in Q3, is on pace for another big sequential increase in Q4. CDW, who works with us through Group M, entered live sports CTV advertising this quarter, and we ran CTV campaigns for the Tennessee Titans, Advanced Auto Parts, and North Face. The weakest performing sectors in Q3 relative to last year were political, automotive, hobbies, and food and beverage. Travel is also still down double digits in a two-year stack, but up over 50% off the low base in Q3 of last year. At a high level, we expect these trends to, by and large, persist into Q4. We continue to see strength in retail, tech, and home and garden, and weakness in auto, driven by the chip shortages and travel due to ongoing COVID concerns. The team has been very busy this quarter and has a number of key wins worth mentioning. We announced in conjunction with the Trade Desk and AMC networks a new solution that allows TV programmers to deliver addressable ads programmatically on linear TV. Quigley Simpson, a full-service agency specializing in brand and performance marketing, made a spend commitment and selected Magnite to serve as the agency's preferred SSP, specifically for our strengths in CTV to address performance marketers' needs. Fubo selected us this quarter as its preferred SSP with a focus on live sports in CTV. Network 7 in Australia successfully used our platform during the Olympics, leveraging our advanced tools to more effectively manage large bursts of inventory during live sporting events. In addition to these client wins, I'm proud to announce Magnite 1 Too Big is Ad Exchange Awards last week at Programmatic IO in New York. First, our CTV platform swept the Best Video Technology for Media Suppliers Award, which recognizes innovative and powerful publishing-facing tech in the video space. Our entry included success metrics from our work with AMC Networks and the Trade Desk. Second, We won the Best Seller Focus Technology Award for our Demand Manager solution. This award recognizes vendors that excel in helping publishers build stronger and more sustainable businesses and illustrates how Demand Manager helped the weather company with their ad rendering speed, spend diversification, and scale. As you can see, it's been a very busy and productive quarter for Magnite. Thanks to the tireless efforts of the Magnite team, we continue to deliver our customers a valuable and highly differentiated solution. We are the only scaled independent omni-channel solution in market and are confident that we will continue to gain and grow share in CTV and DV Plus in the quarters to come. With that, I will hand things over to David, who will go into greater detail regarding financial performance and expectations.
spk08: Thanks, Michael. We're pleased to announce a very solid Q3 to provide some more detail on results and to provide our outlook for growth in Q4. Total revenue for Q3 was $131.9 million. Revenue X-TAC was $114.1 million, up 89% from Q3 2020 on an as-reported basis and up 26% on a pro-forma basis. CTV revenue XTAC was $43.1 million in Q3 2021, almost quadrupled from $11.1 million last year, and was up 51% on a pro forma basis. Mobile revenue XTAC grew 18%, and desktop revenue XTAC grew 11% year over year, both on a pro forma basis. Mobile and desktop combined now comprise what we call DV+, or display, video, and all other Our revenue mix for Q3 2021 on an ex-tax basis was 38% CTV, 36% mobile, and 26% desktop. Operating expenses, which in our case includes cost of revenue, for the third quarter were $155.8 million versus $71.9 million in the same period a year ago. Increases were primarily driven by the inclusion of SpotX. Adjusted EBITDA operating expenses, which represents the difference between Revenue X Tax and Adjusted EBITDA, were $74.1 million for Q3 as compared to $46.6 million in Q3 2020, also driven primarily by the addition of SpotX. Costs were lower than expected, driven by postponement of our return to office, lower anticipated marketing event spend, and reduced travel and entertainment costs. In addition, like many companies, hiring the right talent is taking longer in the current environment. Regarding SpotX acquisition-related cost synergy goals, we've realized more than half of the 35 million in run rate synergies that we targeted. The next phase of synergy savings is on track and expected to occur as we migrate to one best-in-class CTV platform for our publishers and buyers in the future. Net loss was $24.3 million in the third quarter of 2021, as compared to a net loss of $10.5 million in the third quarter of 2020. The increase in net loss was primarily attributable to an increase in amortization of acquired intangibles related to the SPOTx acquisition. Adjusted EBITDA was $40 million, resulting in a margin of 35%, as compared to an adjusted EBITDA of $13.7 million, or a margin of 23% in the third quarter of 2020, driven by continued revenue growth in our legacy business and by the addition of SpotX. Note that we calculate our adjusted EBITDA margin as a percentage of RevenueX tax. Gap loss per share was $0.18 for the third quarter of 2021 compared to gap loss per share of $0.10 in the same period in 2020. Non-GAAP income per share in the third quarter of 2021 was $0.14 compared to non-GAAP income per share of $0.06 reported for the same period in 2020. There were 131 million weighted average basic shares and 146.3 million weighted average diluted shares outstanding for the third quarter of 2021. Capital expenditures, including both purchases of property and equipment and capitalized internal use software development costs, for $6 million for the third quarter of 2021, in line with our expectations. Operating free cash flow was $34 million in the quarter, which we define as adjusted EBITDA plus capex. As a reminder, our acquisition of SpringServe closed on July 1st with cash consideration of $31 million. Our interest expense for Q3 2021 was $7.3 million, of which roughly $6 million was cash. At the end of Q3, we had $188 million in cash on the balance sheet. The slight reduction from Q2 was primarily impacted by the $31 million paid for the SpringServe acquisition and cash interest costs offset by cash flow generated from operations. As a reminder, our cash balances can swing disproportionately, both up and down, compared to the run rate of our business, since we collect and pay the gross amount of flow-through to our sellers while we record revenue primarily on a net basis. I will now share our future expectations. We expect revenue XTAC for the fourth quarter to be in the range of $138 to $142 million. We expect revenue XTAC attributable to CTV for the fourth quarter to be in the range of $52 to $56 million. We expect that CTV will have solid growth in Q4, even with pressure on automotive and travel spend, as Michael mentioned, tough political comps, and an abnormally strong finish to Q4 2020. We believe these factors are transitory and will improve in 2022. We expect that adjusted EBITDA operating expenses in Q4 will be $79 to $81 million. The sequential cost increase in Q4 is primarily due to increased cloud computing costs related to seasonality, return of some marketing expenses, and office-related expenses due to new office leases. As a reminder, we expect that return to office, marketing, and travel costs will add an incremental $3 to $4 million per quarter in operating expenses next year. Based on the midpoints of our expected Revenue X tax and adjusted EBITDA operating expense ranges, we expect adjusted EBITDA margin in Q4 to be approximately 43%. We expect the CapEx for Q4 2021 will be roughly $8 million. We expect CapEx in 2022 to be in the range of $35 to $40 million. We continue to target long-term annual revenue XTAC growth of 25% and adjusted EBITDA over revenue XTAC margins of 35 to 40%. We are thrilled with the progress our teams are making, especially considering all that they've had to accomplish and to integrate with our three merged and acquired companies all while working remotely. Q3 continued to show the powerful financial leverage we have in our business model with strong adjusted EBITDA margin expansion that comes with our revenue growth. With that, let's open the line for Q&A.
spk02: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star, then two. At this time, we will pause momentarily to assemble our roster. Your first question comes from Laura Martin with Natum.
spk11: Hi, guys. Congratulations on good numbers. My first question is on the growth drivers for CTV. So your CTV pro forma... revenue growth was two times the average. Could you tell us, is that, are you getting new customers in CTV? Are you getting more ARPU, larger budgets? Are you getting, is it the CPM premium that CTV gets that's driving the growth of CTV twice the average of the entity?
spk00: Yeah, hey Laura, it's Michael. I will jump on that first and David can provide additional colors. Yeah, I think it's a little bit of all the above. I think what we're seeing is in terms of same store sales, if you will, just increasing opportunities with the supply client, the publishers that we have on board. And I think that that's kind of a natural evolution that we've talked about, and that is there's some reticence if you're a publisher, whether you're CTV or not, when you enter into the programmatic world, if you're used to direct sold inventory. And little by little, you start to see that programmatic is complementary, if not even higher monetization than direct sell, and more inventory is freed up as a result of that, furthering the growth rate in that area for us. David, I don't know if you have a call around CPM or anything like that.
spk08: No, I don't think I have anything to add. CPMs have been consistently strong throughout the year. No significant changes there, but as we all know, they're very high, typically in the $20-plus range in CTV.
spk11: Okay, great. And then my second question, and then I'll get back in queue, is... With SpringServe, you were sort of hoping that we would make some inroads into freewheel. Any update on your competitive position now that you're the only independent end-to-end? Do you have any new business wins for us away from them yet?
spk00: None that we're going to talk about right now, Laura, but traction is really positive. Again, and as you well know, but for the benefit of others, The idea of spring serve as part of Magnite wasn't this rip and replace of free will. It was more as a complement to present ad serving options that the CTV publishers have, and it would allow us to get access to inventory, primarily private marketplace deals or PG, programmatic guaranteed deals, that we wouldn't have access to before. And that's bearing itself out, and we'll definitely be able to share more color as the quarters go on.
spk02: Thanks very much.
spk00: Thank you.
spk02: Your next question comes from Shane Patel with Jessica Hanna.
spk06: Hey, guys. Just had a couple of questions. I was wondering just first, you know, if you guys could just talk a little bit about just, you know, how you're feeling about, you know, your positioning and execution in the CTV space. And, David, you just talked about a little bit just now, but in your prepared remarks you talked about some of the headwinds. in the fourth quarter for CTV. Could you just elaborate on each of those? I think you called out a few. And then second question, Michael, I think you called out some verticals where you were seeing some issues. And I was just curious, with all the concern around the global supply chains and disruptions, if those were to get worse in the fourth quarter, where do you think it would show up? I mean, do you think it would show up kind of across the board? Do you think it would be, you know, in certain areas of programmatic but not in other areas? Just kind of curious for your take on that. Thank you.
spk00: Sure. Why don't I go first because it will dovetail into David's comments that were specifically related to CTV for Q4 from a forecast standpoint or guidance rather. Yeah, so it's interesting. I think generally speaking, If there are supply chain, it exacerbates, which that's not what we're sensing. And when we talk to our agency partners and advertisers, we're sensing that there are some sectors, verticals immune to the supply chain challenges and others that are severely impacted by it. And by and large, those sectors spread out pretty evenly across the platform, you know, DV plus, CTVA. maybe a percentage point difference here or there with one, with one large exception. And that is, um, as you know, we have this managed service business, which, um, uh, focuses a lot on kind of middle market advertisers. And there we, uh, uh, have a disproportionate, um, contribution of the auto, uh, sector, uh, in, in that, uh, vertical in, in that, uh, go to market team. Um, uh, Why is that? Well, you know, one of the largest regional advertisers are the, you know, the big rooftop car dealerships. And they've, you know, found CTV, enjoy it immensely, and they're the biggest affected by supply chain if they don't have inventory to sell. Very hard to justify advertising. And so... With rare exception, it's pretty much across the board, but a little bit – a significantly higher index of auto in the CTV number through the mid-market team and travel. Regional tourism is over-indexed on that team as well. So those two sectors being particularly hurt, one by COVID, one by supply chain, impacts CTV disproportionately. I don't know, David, if you have more color on that that you'd like to share.
spk08: Yeah, let me quantify that a little bit. And first, we feel great about our momentum heading into Q4. We feel like it'll be a strong quarter. From a comp perspective, if you were to remove political from 2020 Q4, our guide straight up is about a 23% year-over-year growth in CTV. If you were to remove the political comps, you get to the low 30s in a year-over-year growth scenario. And if we look at the weakness that Michael mentioned in travel, in automotive, we believe that's impacting us to perhaps $3 to $4 million in CTV in Q4. And if you factor that in, we're at about a 40% year-over-year growth rate. And so with the comp issues and with with what we think are transitory issues from a supply chain perspective. We feel good about Q4, and hopefully that helps to quantify that impact a little bit.
spk06: Yeah, that was helpful, guys. Thank you.
spk02: Your next question comes from Jason Cryer with Craig Hallam.
spk04: All right, thanks, guys. David, I wanted to start out with one for you. Just curious if you can maybe give us an idea of kind of the methodology as you go into the Q4 guide, because for Michael's commentary, it sounds like some of the disruption that you recognized maybe started at the tail end of Q3, and obviously, you know, we're only about a month into Q4, so just curious how you're affecting that into the guide, whether it's a continuation of what you saw or late in Q3 or if you're anticipating maybe some verticals having a little bit more of a hiccup than you're seeing right now?
spk08: As you mentioned, yes. Our guide anticipates and includes some of that softness in those sectors. Our guide assumes that the softness that we've seen in September and what we've seen in October continue throughout the rest of the year. We think that's been stable in October, and that's what we've reflected in our guide for the quarter.
spk04: Got it. Michael, maybe one for you. Now that you've fully acquired SpringServe, can you give us a little understanding of how you go to market with that solution? there's greater market share for Magnite out there than there is for SpringServe. So how do you utilize your Magnite market to kind of promote the SpringServe ad server and try to grow volume or usage there? Yeah, great call, Jason.
spk00: It's in flight, right? The belief is that the SpringServe standalone ad-serving business is a strong business, and by and large, that business is, from a go-to-market standpoint, represented by folks that still carry the SpringServe business card, if you will. Obviously, in cases where Magnet has a deep relationship with a publisher or we utilize that relationship with Magnite and make the introduction. Where it gets interesting is when we're talking about Magnite demand going through Spring Serve and working with clients in that respect. And then that's very much of a coordinated effort with Magnite as lead in that case. And so the great part about Spring Serve being part of Magnite is not just investment in the current product roadmap, access to the hundreds of engineers and product folks that we have, but also expansion globally. As you know, we have a big footprint in APAC, a big footprint in EMEA. SpringServe has largely been not in those markets, and so we see that as a huge opportunity to lead through Magnite's presence in the marketplace and to kind of start on, you know, third base as opposed to a cold start that would normally occur if the spring server wasn't quite a magnet.
spk04: Perfect. And I'm going to try to sneak in one last one on connected TV. So obviously we're seeing some disruption from things like IDFA in the market, and I understand per your comments you aren't seeing that. But over time we've talked about CTV potentially being this flight to safety because it's not impacted by cookies and because it's not impacted by mobile IDs, and I get that some maybe verticals are seeing pressure and whatnot, but do you believe that we're seeing that flight to safety kind of happening in any of these end markets, or do you still think that CTV can represent some type of a safe haven longer term as that market isn't being disrupted like other channels are?
spk00: Yeah, I mean, I think that on the edges, there's a lot of opportunity for CTV. You know, you read a lot about the advertisers that have stalled their campaigns or stopped spend or decreased spend because they're having a really challenging time working with attribution and customer acquisition costs, et cetera. Those guys are extraordinarily lower funnel buyers. They are extremely sophisticated, you know, mobile advertisers. To think that they might, you know, jump from that world right into the world of CTV is probably a bit of a stretch. And those are the guys that, you know, spend, you know, $1,000 a day, you know, $5,000 a day on, you know, the Facebooks, the Instagrams, etc., But then there's a whole other slew of marketers that do social video advertising that have much larger campaigns that also take into account brand attribution that I think are perfect. And our team is set up for that, Jason. We have a team that goes after those brands, those performance-oriented brands that have a national budget that we think can transfer over. And we're having a good deal of success there. And we think that it kind of stays with the The line that we've been saying is that CTV is this kind of democratization of advertising. It's not just the top 200 LNAs. It's going to be 10,000 advertisers, and it's bearing itself out. Got it. Thanks, guys.
spk02: Your next question comes from Shweta Kajaria with Evercore ISI.
spk05: Hi, this is Ben on for Shweta. I just wanted to ask the first question on CTV. Is there any way that you can break up, you know, you talked about your new and existing partnerships with various publisher groups, so from MVPs to OEMs, major content producers, like any way to break up the relative size of those segments by revenue in terms of contribution to CTV revenue and then which are like the fastest growing?
spk08: Yeah, this is David. Yeah, we haven't really shared those, you know, that breakout externally. And I would, you know, there's really not any segment that's that significantly, you know, more quickly or more slowly growing than the others. We've really got momentum really across the board.
spk05: Okay. Okay, if I could just ask another one on your analyst that you shared earlier. that about demand manager adoption being, I think, 20% of total pre-bid requests. Do you think you can get that to 50% plus? Can you just talk about progress there, how you get there? I understand that the advertisers that spend at that spend using demand manager are a lot more valuable. Just any color you could spread there.
spk00: Yeah, sure. As you heard from the investor today, we incredibly bullish about demand manager as a standalone product, but also as this kind of wedge, uh, to be able to get more business from, um, our, uh, publishers, uh, primarily in the, you know, PMP PG area. Um, and so, uh, you know, I, as we talked about, you know, the, when we first lost demand manager, you know, a couple of years back, the sweet spot of the marketplace was, um, publishers that were sophisticated that, uh, had a direct sales team themselves, but weren't, um, so large that they could afford internal resources, um, to, um, uh, run pre-bid on its own. Right. And so, uh, those were the, the, the low hanging fruit, but they were kind of middle sized to, you know, a little bit further down the, uh, uh, chain, if you will, in terms of size. Um, And the sales cycle was going to be longer on the big enterprise folks, folks like weather. You know, it was going to take a while to understand why they would pay for a product that they're kind of using for free. And then they understand the internal costs and the development cycles and how quickly we improved on the product. And so that's the exciting realm that we're kind of in this new area where we're knocking down these enterprise publishers. And that's, I think, how you get to 50%, right? You know, if you land one of those guys in terms of the number of impressions that flows through the system versus, you know, the smaller folks, you don't nearly need as many clients to achieve that. So we think we're extraordinarily well positioned. And, you know, as the battle moves from cookie deprecation, so, having header bidding on the page doesn't make as much sense anymore to having a complete server-to-server solution, that really becomes a really tough road for publishers to manage that themselves. And we think that even provides greater incentive to work with demand manager. Thank you.
spk02: Your next question comes from Matt Swanson with RVC Capital Markets.
spk01: Yeah, thank you so much for taking my questions. If I could just dig a little bit deeper on the supply chain issues, thank you so much, David, for quantifying some of the Q4 impact. Is there any way we can get a little more color on the exact Q3 impact or maybe how the quarter was trending early or mid-September, just trying to kind of separate out the things you can versus you can't control in the quarter?
spk08: Yeah, I mean, obviously the trends that we quantified, three to four million, were over a full quarter. And I think those trends, you know, we really started to observe, you know, probably over the month of September. So, you know, that's how I guess I'd quantify that impact for the third quarter. You know, a third of those levels, I guess.
spk01: All right, I'll bust out my calculator and I can figure that one out. So going back to, you know, more company specific. So at Investor Day, we talked kind of about a company specific camp around 23% of your current mix. So as we're seeing CTV, you know, go up as a percentage, that three-year CAGR now feels like it might already be pretty close to 25%. Can you just talk a little bit about how to think about, you know, that long-term guidance we've been given of over 25%? relative to that market growth as CTV takes on a larger portion of revenue?
spk08: Yeah, so, you know, CTV revenue growth, you know, Magna just came out with a, you know, 34% growth for next year. Others have that growth at a higher level. And so we think those levels are, you know, sustainable and we think we can take share. You'll notice also from an overall revenue perspective, you know, desktop, which is expected to be sort of flat, you know, grew 11% in the quarter. And so, you know, that shows that we're taking share in other areas in addition to CTV. And so we feel strongly that being a, you know, revenue, overall revenue growth of over 25%, you know, is achievable. And to your point, as CTV continues to grow as a percentage of our total revenue, by definition, you know, that will have upward support for overall revenue growth rates.
spk01: Thank you.
spk02: Your next question comes from Tim Nolan with Macquarie.
spk09: Hi. Thanks so much for taking the question. It's on CTV as well, maybe more TV broadly. You know, you guys have such a great position representing so much inventory across TV. And now I guess more with linear as well, this AMC Networks deal I think is interesting. My question is measurement is a huge topic right now in the industry, and I'm wondering if you could talk a little bit about what measurement services you use and what things you see coming down the pike and how you think the whole measurement of TV and CTV evolves over the next year or two. Thanks.
spk00: Yeah, a great question, and I'll hit it. So generally speaking, as an exchange advocate of the publisher, we work with every buyer underneath the sun, and many come with their own requests. We want this campaign measured this way. We want this campaign measured this way with that third party involved. So we have to necessarily work with everybody. We're kind of not in the business of being kingmaker. We're just the facile person with APIs that are able to work with any measurement service. We do proactively work with a handful to create audience segments based upon their measurement to help buyers particularly. in the managed service area and have several relationships there. Again, I think our role is to be open to any new credible form of measurement that's requested in the marketplace and we'll support it. As it relates to how it evolves, it's going to be extraordinarily interesting. You have NBC doing an RFP for a new measurement vendor. Obviously, Nielsen's involved in that RFP, but so are a lot of other startups in newer companies. And then you have the folks like, you know, a Roku or a Hulu that have their own measurement within their own walled garden and aren't really sharing outside of it, which isn't helping, you know, with the overall adoption of CTV. So, I would say the bright spot about measurement is it's acknowledged that it's an area of growth, an area of improvement. And if we're seeing this kind of interest in CTV with flawed measurement, when the industry gets its act together, I think that'll be a real catalyst to be able to propel growth even further.
spk09: Thanks, and maybe if I could tack on a related question, which is about ad fraud, which kind of comes and goes as a topic, and I have been reading a bit more about it lately in terms of ad fraud in the CTV space. Any comments you could make on kind of the status there and what you can do to help prevent that?
spk00: Yeah, so again, in that respect, when we run a platform, we work with all the leading vendors in the, uh, uh, you know, fraud area, uh, to make sure that the inventory is, um, you know, so-called washed. Um, uh, and, uh, you know, I think that the fraud that, uh, is somewhat, um, prevalent in the industry is largely, uh, outside of Magnite. Um, because we have direct relationships with the publisher and we get the signal directly from them that it's a lot easier for us from an inventory quality standpoint to ensure that this is exactly what they said it was. So I think that you'll find on Magnite, it's a pretty well curated, well lit, very low fraud environment. Yep, that makes sense. Thanks a lot.
spk02: Your next question comes from Nick Zangler with Stevens.
spk10: Hey, guys. You know, obviously Snap and Facebook felt the brunt of Apple's privacy changes, and I think you kind of alluded to this and talked about it before, but do you believe ads have been shifted out of social media in totality where you don't play and into the open Internet? or CTV, as you talked about earlier, and did that benefit results at all? It sounds like this could be a long-term issue for social media players. So is this a catalyst for the open Internet as we push forward?
spk00: Yeah, Nick, this is Michael. Good question. I believe so long-term, yes. But there is a class of advertisers that really became experts at advertising in the mobile ecosystem and relied heavily upon IDFA, that they're not going to be able to shift their spend overnight, right? They're just so used to that ecosystem, the attribution measurements, they've grown to trust their models are based upon, you know, from a conversion and lifetime value of an acquisition. All those things have to be reworked. Not unlike, you know, an advertiser that's lived on, you know, Nielsen, you know, household ratings and linear TV having to get used to more of the measurement in CTV. And so I think there's no question the open web will be a beneficiary from that. I just think there'll be an evolutionary, an evolution period where, These marketers will have to tweak their models, get comfortable with new methodology, new attribution, and continue from there.
spk10: That makes sense. You know, additionally, I read that Disney has created a data clean room to match advertiser CRM data with their first-party data. um you know obviously utilizing that for targeting efforts and you know details are scarce right now but you know disney's obviously a big partner for you guys i'm just curious you know what are the implications here is magnite involved and and do you envision other publishers follow following suit yeah so not to to talk about disney specifically because um
spk00: Like you, it's a relatively new concept for them, and the belief would be that if it's done programmatically and it's the business that we currently have a relationship with, it would flow through the pipes, the magnetic pipes, so there wouldn't be any adverse impact to us on And I do think you're going to see more of that. I don't think every publisher can stand up their own clean room, but it goes to show you how zealous publishers are about guarding their user information, right? They're sitting on this mountain of information that to date hasn't really been acknowledged in the buying community. It's been a third-party cookie world with third-party data that has really ruled the ecosystem today. And I think publishers are clearly seeing a shift. And buyers are starting to acknowledge this is really good information. They have a direct relationship with the consumer. It's a consented consumer. I'm going to be able to target very well. And so the idea of running your own clean room isn't as outrageous as it might have been two years ago. I do think you have to have a level of sophistication and size to warrant it. We obviously talked about our clean room technology, and multiple publishers use that. But I do think you'll see more folks dip their toe in in that area, but they're going to be, you know, the very large platforms like the pluses as opposed to, you know, a normal-sized streaming and or otherwise publisher.
spk10: That makes sense. Very helpful. Best of luck going forward. Thanks, Dave.
spk02: This concludes our question and answer session. I would like to turn the conference back over to Michael Barrett for any closing remarks.
spk00: Thank you, Kayla. I'm so proud of how our team has worked remotely to bring this company together and serve our wonderful clients each day. And I'm thrilled to keep updating you on our progress, both in these settings and during the many investor meetings we have scheduled. Thank you for joining us for our Q3 results call. We look forward to talking to many of you at virtual investor meetings hosted by SIG tomorrow, conferences by Craig Hallam on November 16, RBC on November 17, and Stevens on December 2, and Needham on January 12. Thanks again for joining. Have a great evening.
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